The Motilal Oswal Nifty Microcap 250 Index Fund has recorded an 8.1% return over the last three months, outpacing similar small-cap index funds. While this fund leads in the short term, investors should note that different index funds, including international options, have performed better over longer periods like one or three years.
The Motilal Oswal Nifty Microcap 250 Index Fund has outperformed several peers in the index fund category, reporting an 8.1% return over the three-month period ending July 2026. This performance was notably higher than the 6.1% returns delivered by both the SBI Nifty Smallcap 250 Index Fund and the Nippon India Nifty Smallcap 250 Index Fund, according to data provided by ACE MF.
Comparing Fund Performance Across Timeframes
While the Motilal Oswal fund has shown strength in the short term, performance trends vary significantly when looking at longer durations. For instance, the ICICI Pru NASDAQ 100 Index Fund has maintained a lead over one-year and three-year horizons, with returns of 32.8% and 28.0% respectively. This illustrates that microcap index funds, which invest in very small companies, can experience different market cycles compared to large-cap or international index funds.
Understanding Microcap Risks and Volatility
Investors looking at microcap index funds should be aware that these funds invest in companies with smaller market capitalizations. These stocks are often more sensitive to market downturns and may experience higher price swings compared to larger, more established companies. Because index funds simply track a specific market list rather than picking individual stocks, their performance is tied directly to how that entire list of small companies behaves.
Factors for Fund Selection
When evaluating index funds with at least Rs 1,500 crore in assets under management, it is useful to look beyond recent gains. The Motilal Oswal Nifty Microcap 250 Index Fund has demonstrated an 18.4% return over a six-month period, which reflects recent momentum. However, because small-cap and micro-cap stocks can be more volatile, long-term investors often track performance across multiple market cycles to understand how the fund behaves during both rising and falling markets. Reviewing the fund’s expense ratio, tracking error—which measures how closely the fund follows its target index—and the liquidity of the underlying small stocks are key steps for any investor considering this category.